Warner Bros. shareholders were ‘consistently misled’ by Paramount, board says in rejection letter: There’s no Ellison family backstop, and never was

Core Viewpoint - Paramount's bid for Warner Bros. Discovery (WBD) is deemed "illusory" and not taken seriously, with WBD's board emphasizing the lack of genuine engagement during the sale process [1][4][5] Group 1: Paramount's Bid and WBD's Response - WBD's board unanimously rejected Paramount Skydance's all-cash bid valued at approximately $108 billion, citing misleading claims about the financing behind the offer [4] - The board criticized Paramount's assertion of a "full backstop" equity commitment from the Ellison family, stating that it does not exist and relies on an opaque revocable trust instead [5][6] - WBD's letter to shareholders emphasized that the tender offer from Paramount is "not in the best interests" of WBD shareholders and does not qualify as a "Superior Proposal" under the existing merger agreement with Netflix [3] Group 2: Comparison with Netflix Offer - WBD's board prefers the Netflix offer, which is fully financed and backed by a company with a market capitalization exceeding $400 billion, compared to Paramount's reliance on a bidder with a market value around $15 billion [7][8] - Under the Netflix deal, WBD shareholders would receive $23.25 in cash, $4.50 in Netflix stock, and shares in Discovery Global, providing additional upside [7] - The Netflix transaction is characterized as safer and richer, requiring no equity financing and supported by robust debt commitments, unlike Paramount's proposal [8] Group 3: Financial and Regulatory Considerations - WBD warned that the PSKY deal would result in a high debt-to-Ebitda leverage ratio of 6.8x by 2026 and virtually no current free cash flow, creating a risky capital structure [8] - The board highlighted that there is no material difference in regulatory risk between the two transactions, with Netflix's agreement to a $5.8 billion reverse break fee indicating confidence in closing [9][10] - WBD argued that backing the PSKY offer could expose investors to substantial additional costs, including a $2.8 billion termination fee owed to Netflix if the deal fails [11]